Palm’s Forecast Shrinks Even More

SAN FRANCISCO — Struggling smartphone maker Palm said it expects fiscal second-quarter revenue to come in well below Wall Street’s forecast, as the worsening economic climate exacerbates already weak demand for its devices.

The company’s shares fell 18 percent in extended trading after dropping more than 20 percent during the regular session.

In a statement, Palm said it is seeing reduced demand for its products and that a difficult global economy has “greatly intensified the negative impact” on sales.”

“We are seeing unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products,” said Ed Colligan, president and chief executive.

Palm forecast revenue of $190 million to $195 million for the quarter ended Nov. 28, versus an average analyst estimate that ranges from $299 million to $363.4 million, according to Reuters Estimates.

In the comparable period last year, the company reported revenue of $349.6 million.

The company said it will cut an unspecified number of jobs in the U.S., consolidate its European operations, and shift some Asia Pacific operations to the U.S.

Last month, Palm confirmed that it had begun to reduce headcount, but would not say by how much.

The company expects the cost-cutting moves to reduce quarterly operating expenses by $20 million.

Palm will record restructuring charges of $7 million to $9 million in the second quarter, along with a charge of $10 million to $15 million for inventory component purchase commitments.

The company also expects to record a valuation allowance on its U.S. deferred tax assets of roughly $400 million.

Palm makes the Centro and Treo smartphones. The company’s market share has been shrinking as it loses market share to rivals Research in Motion Ltd (RIM.TO: Quote, Profile, Research, Stock Buzz) and Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz). Palm is planning to launch a new operating system and device in the near future.

Shares of Sunnyvale, Calif.-based Palm closed the regular session down 51 cents at $1.88 and fell a further 33 cents in after-hours trading.

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